Günter Lang
How Different are Wages from Wage Potentials?
Analyzing the earnings disadvantage of immigrants in Germany
Abstract:
Immigrants
in Germany
display a poor earnings performance relative to
natives. Arguing that human capital endowments identify earnings
potentials
rather than actual earnings, this paper estimates a stochastic earnings
frontier and searches for systematic differences between natives and
migrants
in terms of distance to the frontier. GSOEP-Data of the year 2000 is
used for
estimation. The empirical results clearly support the frontier
assumption, but
– surprisingly – find natives and immigrants at about the same distance
to the
frontier. Assuming a half-normal distribution of the wage-inefficiency
term,
both groups transformed on average a modest 81% share of their
potential
income into market earnings. Due to the similar positions of natives
and
immigrants relative to the frontier, the wage discrimination hypothesis
is
rejected. Actually, human capital differentials are clearly the most
important
source for wage inequality. The earnings frontiers of immigrants from Eastern
Europe as well as
from Turkey
are steeper than the respective frontier of
natives, which supports the assimilation hypothesis. No assimilation is
found
for migrants from the European Union and from the former Yugoslavia.
JEL: J31, J61,
J71
Paper:
Paper available as pdf-file.
Beitrag Nr. 256, Volkswirtschaftliche Diskussionsreihe, Institut
für
Volkswirtschaftslehre der Universität Augsburg
Contact:
Günter
Lang, University of Augsburg, Department of Economics, D-86135
Augsburg,
Germany, phone +49-821-598-4195, fax +49-821-598-4230,
email: guenter.lang@wiwi.uni-augsburg.de
v.
K., 08.01.2004